Page 94 - Urban water supply handbook

IMPROVING URBAN WATER INFRASTRUCTURE THROUGH PUBLIC-PRIVATE PARTNERSHIPS

IMPROVING URBAN WATER INFRASTRUCTURE 3.13

when the private firm does not fill a vacancy created when an employee retires or
voluntarily terminates employment. Recent long-term contracts for water and
wastewater in Atlanta and Milwaukee, respectively, featured no-layoff clauses and
reductions in the workforce only through attrition. After entering into a long-term
partnership for wastewater services, Indianapolis reduced its workforce from 321
to 196 through attrition. 30
City officials can take other approaches as well to avoid negative impacts on
employees. Employees can be transferred to other departments within the city or
be offered positions with the private contractor. In addition, cities can offer early
retirement incentives to reduce the number of employees.
Another option for city officials is to enter into a management contract for
water and/or wastewater services. Under such agreements, the private firm takes
over responsibility for day-to-day management of operations while the existing
workforce remains city employees. Buffalo is the largest city in the United States
to operate under a 1997 management contract for water services. The water divi-
sion’s 160 employees remained in-house and were guaranteed jobs for 5 years.
Employees are paid by the city, and the private firm reimburses the city for
employee costs.

3.5.2 Loss of Control
In addition to opposition by public employees, elected officials and public adminis-
trators may oppose public-private partnerships because they fear a loss of control
over daily water and wastewater operations. Elected officials may sense that private
partners will take over many aspects of public policy decision making, especially
rate making, and supervisory personnel perceive a threat to their livelihoods.
In practice, most of these concerns are overcome with effective performance
monitoring and oversight policies included in the contract, but some officials
remain unconvinced. For example, in most water and wastewater contracts, con-
trol over water and sewer rates remains with the municipality. In Camden, New
Jersey, for example, the city maintained control over water and sewer rates, fees,
and capital improvements. The current 20-year agreement with U.S. Water is in its
third year and has increased the city’s water and sewer system cash flow by nearly
$11 million. In addition, the firm increased water and sewer collections by nearly
$8 million over the amount the city had previously collected and brought the city
back into regulatory compliance. 31
More contracts are performance driven and guarantee service quality.
Contracts often have penalties for nonperformance, and some provide financial
incentives for superior performance. Private firms must meet environmental per-
mit standards or face possible financial penalties.
With contractual guarantees on service quality and costs, most municipalities
have benefited from public-private partnerships. The key is ensuring a contract

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